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MEDICARE CATASTROPHIC CARE PREMIUMS MAY BE REDUCED DUE TO HIGHER THAN EXPECTED REVENUE SURPLUS -- SEN. BENTSEN; REDUCTIONS MAY UNDERCUT HILL DISSIDENTS

Executive Summary

Sen. Bentsen (D-Texas) say he will move "as quickly as possible" to reduce the supplemental Medicare premiums paid by beneficiaries for catastrophic care coverage and, beginning in 1991, outpatient drugs. In an April 21 letter to Treasury Secretary Brady, Bentsen said that "current estimates by the Congressional Budget Office and the Joint Tax Committee suggest that revenues from the supplemental premiums will result in a surplus of more than $9 bil. from FY 1989-1993 -- more than twice as much as was originally projected, and far in excess of that required to reach the reserve and contingency margins called for by the law." The new estimates, Bentsen told Brady, "if confirmed, would allow us to reduce the cap on the supplemental premium quite substantially -- or to take other measures to reduce the premiums beneficiaries are expected to pay." The senator said he intended to "move as quickly as possible to eliminate the excess by reducing the supplemental premium" if Treasury revises its estimate of revenues received for the program. Preliminary estimates, according to Bentsen, indicate that if CBO and Joint Tax Committee projections are accurate, the cap on the supplemental premium "could be reduced to $500 in 1989, to $550 in 1990, to $600 in 1991, to $700 in 1992, and to $800 in 1993." The Medicare Catastrophic Care Act set the cap for the supplemental premium at $800 in 1989, $850 in 1990, $900 in 1991, $950 in 1992 and $1,050 in 1993. Bentsen asked Brady for a "review of the Administration's current estimates and any recommendations you may have for rectifying this regrettable situation. Specifically, I am interested in whether Treasury Department estimates indicate that excess collections are being made and whether the Administration would support legislation designed to remedy the problem." A reduction in supplemental premiums would go a long way toward defusing what has become a loaded-gun issue for Congress. Although the catastrophic care legislation had a relatively smooth ride through Congress once a compromise bill emerged from the conference committee in 1987, the sudden increase in premiums surprised a sizable and vocal group of Medicare beneficiaries, who have caught the attention of Congress. On April 12, a "sense of the Senate" resolution to review the Medicare Catastrophic Care Act, "especially the financing mechanism," passed the Senate by a 97-2 vote ("The Pink Sheet" April 17, p. 6). A similar measure passed the House by a 408-0 vote. In addition, a group of 30 Republicans members of Congress is attempting to stall the outpatient drug benefit by resurrecting a proposal, first advocated by Rep. Madigan (R-Ill.), that would have Medicaid reimburse outpatient drugs for Medicare beneficiaries whose income is below 150% of the federal poverty level. At an April 20 press conference, Bentsen explained that while revenues for the program were originally set at $21 bil. over the next five years, revenues are now projected to top $25 bil., leaving approximately $4.9 bil. beyond a planned surplus of $4.2 bil. Reducing the surplus by that amount would result "in a cut of at least 16% in supplemental premium revenues," he said. Bentsen added, however, that "no decisions have been made on how to apportion any reduction among beneficiaries." Most of the excess surplus is derived from supplementary premiums, with only $100 mil. arising from Medicare's basic premiums, he noted. The Senate Finance Committee chairman ruled out applying the existing surplus to projected deficits from the catastrophic care program's prescription drug benefit, which will be phased in beginning in 1990. Describing the drug benefit program as a "tough one," he said that "when it gets to the drug benefits, we're going to have to feel our way along and see what happens." The senator said he remains convinced that the catastrophic care program "is a good one" and "is indeed the best buy in town." He attributed the growing concern of the elderly about the program's premiums to "misinformation" about costs and benefits. While noting that a couple making $74,000 would pay the maximum premium of $1,600 per year, Bentsen said that 60% of beneficiaries will pay the minimum rate of $4 per month in 1989. Asked whether his revenue reduction proposal had the support of two key proponents of the catastrophic care program, House Ways and Means Committee Chairman Rostenkowski (D-Ill.) and House Energy and Commerce Committee Chairman Dingell (D-Mich.), Bentsen said he was "not sure what they will do." He said he had been in contact with Rostenkowski, but would let the congressman "speak for himself." On the issue of whether other members of Congress might seek to repeal the catastrophic care law altogether, Bentsen said he "wouldn't doubt they would try." Noting that polls show a majority of beneficiaries support the program, however, Bentsen characterized any such effort as "a serious mistake."
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